WTO Defeat for China May Signal More Trade Complaints (Update1)
WTO Defeat for China May Signal More Trade Complaints (Update1)
By Jennifer M. Freedman
Feb. 15 (Bloomberg) — China;s first defeat at the World
Trade Organization may trigger more complaints against the nation,
which already faces another four cases challenging its commercial
practices, trade lawyers say.
WTO judges said on Feb. 13 that Chinese duties on imported
car parts violate global trade law, siding with the U.S., the
European Union and Canada. China ignores trade accords by applying
tariffs that lead automakers to source a substantial number of
components domestically, the decision said.
China;s $19 billion vehicle market is the world;s third
largest as annual economic expansion of 10.6 percent over the past
five years has boosted incomes and spending on cars and homes. The
case over car-part duties is the first in which governments have
jointly filed a WTO complaint against China.
“This case gets China;s feet wet,;; said Daniel Crosby, a
trade attorney at Budin %26amp; Partners in Geneva who has represented
clients on WTO compliance issues. “As China gets used to the
system and as countries see that China is participating as a
normal WTO member, then maybe other countries won;t be as hesitant
to bring cases in fear of retaliation.;;
While the auto-parts ruling won;t open the floodgates to
other cases against China, it suggests more complaints are in the
pipeline against the world;s fourth-biggest economy, said Lawrence
Herman, an international trade lawyer at Cassels Brock %26amp; Blackwell
in Toronto.
`Part of a Trend;
“There are enough signals that this is going to be part of a
trend, not because it;s fashionable, but because China is
challenging in trade terms a lot of countries, the U.S. in
particular,;; Herman said. “My prediction is that there are going
to be significant cases brought against China.;;
The U.S. trade deficit with China, which stood at $18.8
billion in December, and concerns among American industries about
Chinese competition in the U.S. are driving calls for the Bush
administration to take action, Herman said. U.S. exporters are
also lashing out about Chinese rules, he said. The country passed
Canada to become the largest source of U.S. imports last year.
The U.S. has another three cases against China pending at the
Geneva-based WTO, and Mexico has one. The U.S. has complained
about Chinese piracy of copyrighted movies, music, software and
books; curbs on the sale of foreign publications and audiovisual
products, and subsidies given to China;s steel, wood products and
information technology industries.
Mexico, echoing the U.S., accuses China of illegally giving
its manufacturers tax breaks and restricting foreign investment.
Experience
For its part, China won;t hesitate to complain when it
determines it has a strong case, said Lourdes Catrain, a trade
lawyer at Hogan %26amp; Hartson in Brussels.
“China is acquiring experience, very important experience,
of how the WTO dispute settlement system works,;; said Catrain,
who has been involved in several EU-China trade disputes. “If
China feels it has a strong case against others, they will bring a
case, but it will be a very careful exercise.;;
China;s reaction to the confidential ruling “will be a key
determinant of how countries engage China in dispute settlement in
the future, including whether they appeal the case,;; Crosby said.
While China has declined to say whether it plans to appeal the
decision, most governments on the losing side of a WTO judgment do
so, statistics from the trade arbiter show.
`Thorough, Rigorous;
“They will appeal if they feel they have a strong legal
case,;; Catrain said. “They are very thorough and rigorous in
preparing;; their cases and “that will be a driving force, more
so than policy considerations.;;
EU Trade Commissioner Peter Mandelson told reporters today in
Moscow that he hopes China “complies fully and puts itself right
by the WTO, not only in this question concerning auto parts, but
in other respects where it is falling short;; in its WTO
commitments.
Mandelson will travel to Beijing next week, where he;ll meet
with Chinese Commerce Minister Chen Deming to discuss the creation
of a group to address trade imbalances and exchange-rate changes,
as agreed by the two governments in November.
Large foreign companies that have interests in China,
especially if they;re established there, fear retaliation from the
Chinese government, Crosby said. “Beijing has to walk a pretty
fine line between encouraging investment and free competition on
one hand and, on the other, protecting its control over certain
aspects of the economy and certain industries where state-owned
companies dominate.;;
Services Complaints?
The bitterest future disputes involving China will probably
center around challenges to government influence over economic
policies, or where state-owned enterprises stand to lose out
because of liberalization, Crosby said.
China may face complaints at the WTO over its resistance to
opening its banking and telecommunications industries to foreign
companies, said Pascal Kerneis, managing director of the European
Services Forum in Brussels. While a case over telecoms policies is
more clear-cut, “if we would go for a panel against China on
banking, I;m not sure we would win,;; he said. “China has
modified many aspects of its banking legislation already.;;
“I don;t think anything can push China to move faster than
they want to move,;; Kerneis said. “They behave like the U.S.
They do what they want to do.;;
To contact the reporter on this story:
Jennifer M. Freedman in Geneva at
